The Fraser Valley suburbs, which became the idle recipient of a spillover of cheap credit created in the depths of the Vancouver real estate boom is now facing repercussions as the party comes to an end.

With home prices correcting in the city of Vancouver, the ripple effect has spread across the city and into the Fraser Valley, particularly in the once euphoric cities of Langley and Abbotsford. Condo price declines have been sharp. Since Langley condos peaked in June, the home price index has dropped 10%. Price declines have accelerated in Abbotsford where the price index shows a 14% drop since peaking in June.

It turns out Vancouver’s suburban condos do not defy the laws of gravity. Although, considering price growth had reached dizzying heights during the peak of the mania real estate bulls can perhaps chalk this up as just a minor set back. At the peak of the mania both Langley & Abbotsford experienced year-over-year condo price growth of 49%.

However, with prices clearly declining, year-over-year price growth will soon dip into negative territory, perhaps as soon as next month. Inventory for sale continues to grow after bottoming near the end of 2017. As of January, condo inventory has increased over 250% year-over-year in both cities.

The recent price declines in the more affordable suburban condos also blows a gaping hole in the theory that OSFI’s B-20 mortgage stress test was making housing less affordable. A subtle reminder that the demand for housing is largely determined by the rate of change in mortgage credit growth.